No Great Rotation Out Of Bonds By Pension Funds, Insurers In Q4

By Teresa Rivas

Much has been made about a potential “great rotation” away from bonds into stocks, but U.S. pension funds and insurance companies aren’t having it. Both groups increased their investment in bonds while selling equities at the end of 2012, according to J.P. Morgan.

Pension funds and insurers piled into bonds to the tune of $45 billion in the fourth quarter of last year, relatively in-line with buying patterns since 2009, which suggests that these investors aren’t as concerned about their bond holdings as some have feared. To this point, their selling of stocks also picked up in the second half of 2012, as they pulled $15 billion from equities, compared to flattish outflows first half, which smells more of profit-taking during the rally than stake-building behavior.

Given these flow trends, as well as performance in bond and stock markets, pension funds and insurers continued to hold a stable 40% and 43%, respectively, in bonds throughout 2012. So at least from this sector, there’s no evidence of a great rotation, yet.

About Focus on Funds

As exchange-traded funds and other investing vehicles have ballooned in number, the task of figuring out what works well and what doesn’t has only gotten harder. Barrons.com’s Focus on Funds looks under the hood of ETFs, mutual funds and hedge funds for overlooked values, actionable ideas and the latest pitfalls for fund investors.

Chris Dieterich has covered the U.S. stock market for The Wall Street Journal and Dow Jones Newswires. He is a graduate of Regis University and the Missouri School of Journalism.